Question

Working capital is typically what percentage of total capital investment for a chemical process plant?

• A. \(5-10\%\)
• B. \(10-20\%\)
• C. \(30-50\%\)
• D. \(50-70\%\)

Hint:

Standard Capital Distribution Rule for Chemical Plants: - Fixed Capital Investment (FCI) \(\approx 80\% - 90\%\) of TCI - Working Capital (WC) \(\approx 10\% - 20\%\) of TCI

Answer 1

The Correct Option is B

Concept: Total Capital Investment (TCI) required for an industrial project is divided into two distinct components: \[ \text{Total Capital Investment (TCI)} = \text{Fixed Capital Investment (FCI)} + \text{Working Capital (WC)} \] - Fixed Capital Investment (FCI): Sunk capital required to design, purchase, and construct the physical plant infrastructure and equipment. - Working Capital (WC): Liquid funds required to finance initial raw materials, inventories, salaries, and short-term operating expenses when starting up the plant before receiving steady sales revenue.

Step 1: Reviewing industrial standards for chemical plants.
In standard chemical processing facilities, the physical equipment, piping, instrumentation, and construction materials account for the largest share of capital expenditure. This means the Fixed Capital Investment (FCI) typically comprises around \(80\%\) to \(90\%\) of the total budget. The remaining liquid funding allocated to the Working Capital buffer typically ranges between \(10\%\) and \(20\%\) of the Total Capital Investment. This typical allocation range matches option (2).